Urban Outfitters is 'losing momentum'

Despite rolling out higher-ticket items like Adidas shoes and
Calvin Klein underwear, the average price at Urban Outfitters was
unchanged in the third quarter, analyst Eric Beder at
Wunderlich Securities wrote in a note to clients.

This means that Urban is having to sell merchandise on sale and
clearance rather than full-price, according to Beder.

Competitors American Eagle and Hollister both sold merchandise at
higher prices, an indication the companies' merchandise
assortment and marketing strategies are working.

"We are increasingly worried thatUrbanOutfitters is losing momentum to its other teen
competitors," Beder wrote in the note.

His firm downgraded Urban's shares to "hold" from "buy," an
indication that analysts believe the investment is risky. Shares
have declined by about 20% in the past 6 months.

Urban is the fifth-most popular brand among upper-income
teens, behind Nike, Forever 21, American Eagle, and Ralph Lauren,
according to research firm Piper Jaffray's recent
survey on teen spending.

The retailer, along with Abercrombie & Fitch, American Eagle,
and Aeropostale, has been hurt by fast fashion companies like
Forever 21 and H&M, which offer ultra-trendy items at a
fraction of the price.

Forever 21 has been
challenging Urban Outfitters by selling trendy items for
less.Getty

While these companies have made steps to offer cheaper
clothing, they are still much more expensive than fast fashion.
They have to rely on smart marketing and advertising to get teens
to shell out for their products.

And it's harder than ever to capture those dollars.

A recent report by Morgan Stanley
shows that millennialsare spending more on expenses
like rent, cellphones, and personal services than young people a
decade ago.